A multiple employer trust (MET) is a way for several businesses – often smaller ones – to band together to offer employee benefits. It’s becoming an increasingly relevant option as small businesses struggle to compete with larger companies when it comes to attracting and retaining talent with robust benefits packages.
This article will give you a comprehensive overview of what a multiple employer trust is, including its potential benefits and drawbacks, and help you decide if it’s the right choice for your business. But before making any decisions, it’s always wise to consult with an insurance broker or benefits specialist to get personalized advice.
What is a Multiple Employer Trust (MET)?
A Multiple Employer Trust, or MET, is an employee benefit plan that a group of employers creates. The purpose of a MET is to offer benefits, most often health insurance, to the employees of those employers.
METs work by pooling money from all the participating employers. By combining their resources, they can usually get better rates and benefits than each employer could get on its own.
Typically, no single employer can contribute more than 10% of the MET’s total funding. METs can be fully insured, meaning they purchase insurance to cover their obligations, or self-funded, where they pay claims directly.
Multiple Employer Welfare Arrangements (MEWAs)
A Multiple Employer Welfare Arrangement (MEWA) is similar to a MET, but it falls under specific regulations defined in the Employee Retirement Income Security Act (ERISA). So, what’s a MEWA? It’s basically a health plan offered to multiple employers, allowing them to pool resources and potentially get better rates.
However, MEWAs come with stricter rules, especially for businesses with over 25 employees. Because of ERISA, MEWAs have to meet certain standards, and it’s essential to understand these requirements to stay compliant. In general, MEWAs are subject to more oversight than METs, so it’s crucial to know the differences before deciding which option is right for your business.
Purpose and Benefits of Multiple Employer Trusts
The main reason METs exist is to offer affordable and competitive employee benefits. By banding together, small businesses may be able to negotiate better rates with insurance companies.
METs allow companies to share costs and pool risk, which can create savings for everyone involved.
What are the advantages of joining a MET?
- Reduced taxes: A MET may offer tax advantages to participating employers.
- Better benefits: Employees may be able to access a wider range of benefits than their employer could offer on its own.
- Improved retention: When employees are satisfied with their benefits package, they’re more likely to stay with the company.
- Portability of benefits: Employees may be able to keep their benefits if they switch jobs to another employer participating in the MET.
What are the downsides of Multiple Employer Trusts?
While METs can offer advantages, there are also some drawbacks to keep in mind:
- Less Flexibility: You might not have as much freedom to customize benefits packages to suit your employees’ specific needs.
- Fiduciary Duty Still Applies: Even though you’re part of a larger trust, you’re still legally responsible for acting in your employees’ best interests.
- Complex Regulations: METs operate under a complicated set of rules, which can be difficult to navigate.
- Risk of Mismanagement: Like any trust, there’s a risk of mismanagement or even fraud. It’s crucial to thoroughly investigate any MET before joining.
Who can join a Multiple Employer Trust?
METs often require a minimum number of employers to participate, but the exact eligibility rules depend on the trust’s specific guidelines.
As for who can benefit from the MET, this is usually limited to current and former employees of the participating employers, as well as their eligible dependents and beneficiaries.
METs can be structured in different ways, too. Some are sponsored by a board of directors, while others are co-sponsored.
Putting It All Together
METs can be a cost-effective way for small businesses to offer health insurance. But it’s important to carefully weigh the pros and cons before deciding whether a MET is right for you.
Talking with a qualified insurance broker is essential. They can help you understand the complex regulations surrounding METs and make sure you’re choosing a plan that meets your employees’ needs and complies with all applicable laws.
As group health insurance continues to evolve, METs may become an increasingly viable option for small businesses looking to attract and retain top talent by offering competitive benefits packages.